In the words of Lord MacNaghten in Salomon V. Salomon and Co. Ltd.(1897). “The companyis at law a different person altogether from the subscribers to the memorandum…….”
This is the ratio decidendi in Salomon’s case and constitutes one of the fundamental principles of company law.
In simple legal parlance the principle of legal personality of the company is to the effect that when a company is incorporated it becomes a legal person, distinct and separate from its members and managers. It becomes a body corporate or a juristic person. It acquires an independent legal existence with rights and subject to duties with certain capacities and subject to incapacities.
The principle of corporate legal personality is now exemplified by the words that “From the date of incorporation mentioned in the certificate of incorporation, the subscribers to the memorandum together with such other persons as may from time to time become members of the company shall be a body corporate……”
The most fundamental attribute of incorporation from which all other consequences flow is that on incorporation a company becomes a body corporate – a different legal entity. This principle manifests itself through the principle of:
i) Limited liability: Sec 4 (2) (a) and (b) of the Companies Act.
ii) Perpetual succession: Sec 16(2) of the companies Act.
iii) Sue or be sued: Foss V. Harbottle (1843)
iv) Owning of property: section 16(2) of the ActMacaura V. Northern Assurance Co.(1925)
v) Capacity to contract: Lee V. Lee‟s Air Farming Co. Ltd(1961)
vi) Common Seal: section 16 (2) of the Act.
A critical analysis of the Judicial and statutory authority demonstrates that the principle of corporate legal personality is incontrovertibly an important and fundamental aspect of company law.